The Japanese yen is still hovering above 83 versus the greenback after the BOJ decision to lower the interest rate to 0% to .1% setting a new ¥5 trillion for buying Japanese government bonds, commercial papers and assets-backed securities keeping its current ¥30 trillion funding of the banks which rose earlier from ¥20 trillion as a new action for fighting deflation and spurring investment and growth amid the current strong yen which tackles the Japanese exports competitivity. USDJPY rose to 83.9 after decision before coming down again to 83.2.

The single currency could creep again trying to get over 1.38 after falling yesterday in a profit taken wave with the market focusing on the European debt sustainability. The single currency  is still getting use of the ECB keeping of its easing policy unchanged while the Fed, BOE and BOJ are still looking for further easing steps to keep their recovery after flattering trading currently well above 1.36 versus the greenback.

The growth signs are still improving in the Euro zone and especially in the germane leading economy getting use of the slump of the single currency which has been hit in the beginning of this year by the debt crisis which attracted the market focusing this year pushing the single currency below 1.2 while the deflation concerns are emerging in US putting pressure on the Fed to take a second round of its quantitive easing policy buying more Mortgage backed securities and rolling over it’s holdings of treasury securities as they mature before this deterioration can have further negative impacts on the consuming and capital spending and to inform the markets that the Fed will not stand seeing the economy falling back in a second dip recession with no action even with the interest rate near 0% which is keeping the greenback under pressure across the broad until now.

The cable could also get over 1.59 today after finding support at 1.575 yesterday. The British pound is still skeptical lagged behind the single currency rising versus the greenback but it is still showing strength below 1.58 as the growth downside risks amid slowing of the US growth in the second half of this year and the worries about its debt especially after the release of UK public sector net borrowing of August which was expected to be 12.2b Stg from 3.173b Stg and came at 15.3b Stg and King's recent remarks that the British debt is in need to a credible plan and The MPC member Possen referring to the BOE readiness to take further easing steps after dovish MPC released minutes of its recent meeting have shown tending for further stimulation actions.

These expected global easing measures could push the gold up breaking 1300$ and it is still keeping its gains above it since the new dovish US Conference Board's Consumer Confidence release which slumped to 48.5 while the market was waiting for 52.9 in September after rising to 53.5 in August from 50.4 in July.

By god's will, it is still important by the end of this week to wait for the release of September US non-farm payrolls which are expected to be up by 3k after losing 54k in August and as a key of it we wait today for the release of ADP non-farm employment of September which is expected to be up by 18k after losing 10k in August and we have also today US ISM non-manufacturing index of September was 51.5 in August to be 51.8.

Best wishes


FX Consultant

Walid Salah El Din

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